FILE PHOTO: BA plane taxis past tail fins of parked aircraft to runway near Terminal 5 at Heathrow Airport
FILE PHOTO: BA plane taxis past tail fins of parked aircraft to runway near Terminal 5 at Heathrow Airport

Airlines Slash Flights Across Globe as Demand Evaporates

By Mary Schlangenstein, Anurag Kotoky and Christopher Jasper Time of article published Mar 16, 2020

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INTERNATIONAL - Airlines worldwide will shrink operations to only a trickle of flights, severing global links and putting hundreds of thousands of jobs at risk as they fight to preserve cash and survive the coronavirus pandemic.

British Airways owner IAG SA will slash capacity for April and May by at least 75% amid the collapse in demand and government restrictions aimed at slowing the disease. Partner American Airlines Group Inc. will cut international long-haul flights by the same degree in the biggest reductions by a U.S. carrier.

Ryanair Holdings Plc and Air France-KLM announced even deeper cuts at 80% and 90% respectively, and the Irish company said its entire fleet may be grounded. Paris’s two biggest airports plan to shutter terminals as major travel hubs around the world stand almost empty, while TUI AG, the largest vacation firm, will suspend the bulk of its package holiday, cruise and hotel operations.

The actions reflect mounting fears that Covid-19 threatens the survival of even healthy travel companies as people stay home and the disease wipes out economic growth. White House officials are looking at letting cash-strapped carriers keep some taxes and passenger fees, while European governments are exploring measures that could go as far as partial nationalization.

“Coordinated government and industry action is needed now if catastrophe is to be avoided,” the Sydney-based CAPA Centre for Aviation said Monday. Otherwise, “emerging from the crisis will be like entering a brutal battlefield, littered with casualties.”

Many airlines have probably substantially breached debt covenants already, and the pandemic will bankrupt most carriers worldwide by the end of May without coordinated action, the report said.

Fallout from the outbreak is sparing few airlines anywhere.

Delta Air Lines Inc. and United Airlines Holdings Inc., the biggest U.S. network operators alongside American, further reduced schedules. And in Australia, Qantas Airways Ltd. said it plans a fourth round of capacity cuts after the government forced anyone arriving from overseas to isolate themselves.

IAG, which owns airlines in Spain and Ireland as well as BA, will freeze hiring and veteran Chief Executive Officer Willie Walsh, who was due to stand down this month, will delay his retirement. Like many airlines the company said it’s no longer possible to provide estimates for full-year earnings.

At Air France-KLM, CEO Ben Smith addressed staff in a video following an extraordinary board meeting and talks with the French and Dutch governments, which hold stakes in the carrier, on support that could include postponing taxes, fees and charges.

“We don’t know when this will end,” said Smith, who is taking a 25% pay cut. The company has begun talks with unions on work-hour reductions and has pulled wide-body jets including Airbus SE A380s. The superjumbo is also suffering a cull elsewhere, with Dubai-based Emirates grounding 29.

Global airport operator Aeroports de Paris said that in addition to closing some Paris terminals and suspending airline fees for parking jets, it has shut shut down hubs in Amman, Jordan, Ohrid and Riga, Latvia.

Cuts at Finnair Oyj will be among the steepest, with the carrier eliminating about 90% of normal capacity from April “until the situation improves.” It had already taken a battering from the earlier collapse in Asian travel after following a strategy focused on serving China, Japan and South Korea.

Companies have sought to provide reassurance about their liquidity, with EasyJet Plc saying it has a 1.6 billion-pound ($2 billion) cash balance, an undrawn $500 million revolving credit and aircraft worth more than 4 billion pounds. Europe’s second-biggest discounter said it expects to ground most planes while operating what it called “rescue flights” for short periods.

Ryanair said it has 4 billion euros ($4.5 billion) in cash and will also defer capital spending and share buybacks to bolster reserves.

TUI fell as much as 39% in London, the most ever, after saying
it was winding down travel. The group’s airlines are now
focused on bringing people home, and the last two or three
cruise ships will stay in port once they dock. Destinations where some outbound flights continue include Egypt, Cape Verde and Mexico.

Virgin Atlantic Airways Ltd. chief Shai Weiss has written to U.K. Prime Minister Boris Johnson saying British carriers and airports may need credit of 7.5 billion pounds, people familiar with the matter have said.

Job cuts are also mounting, with tri-national Scandinavian carrier SAS AB temporarily laying off as much as 90% of its workforce as it cancels most of its flights. Elsewhere recruit freezes have become the norm.

American announced additional cuts hours after President Donald Trump extended a ban on some flights into the U.S. to include those from the U.K. and Ireland, while U.S. capacity will fall 20% in April and 30% in May from a year earlier. The carrier is also cutting flights to numerous cities in South America, Australia, New Zealand and Asia.

United will reduce its capacity about 50% in April and May, deepening previous cuts, the company said late Sunday. Executive salaries will be halved and talks will begin with unions to lower wages, with CEO Oscar Munoz warning that the process will “be painful for all of us.”

BLOOMBERG 

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